Rational or Hocus Pocus

Good Morning Ladies and Gentlemen

Year-end competition

Ben asked me about Incrementum’s partners‘ positions in the year-end competition. I finished second and had my numbers published last spring; there is complete transparency. However, my partners did not participate. The year before, my partner Hans participated, but in 2022 he was too busy making money for our investors and this he did! Now back to the competition. I usually finish more or less among the first three. This year as mentioned, I finished second. When I was in the first place, I sent the silver coin to the person in second place. This happened roughly four or five years ago when my friend from University, Andreas, received the coin.

Little secret

The question is, how do I finish within more or less the first three regularly? Ok, let me tell you a little secret. It is because I orient myself at the futures prices and keep away from speculation and daily noise at the start of the year-end competition.

Futures prices

All the buy- and sell-side participants‘ know-how of an entire market is reflected in those futures prices. So, for example, Brent crude oil was trading at 125 in March 2022, but the futures contract for December stood at 86, which meant that even producers, the largest oil companies on the planet, did not believe that oil would finish the year at 150. Otherwise, they would not sell their products at a much lower price in a forward market. Alternatively, while I am writing this, the price for one ounce of gold in December 2023 is trading at 1’977. So what is the rationale for coming up with a price estimate of, let us say, 2’463.29? It does not make sense when currently, even the largest gold miners are happy to sell their production forward in December 2023 for 1’977. Of course, futures prices fluctuate heavily, a little less at the long-, yet more at the short end. Still, they are always worth looking at as one indication of several.

Psychology

Humans have a bias toward overweighting short-term events. When investing, this is not always very helpful. Moreover, we are awful at admitting mistakes. We absolutely hate being caught wrong. Even after years of underperformance, we keep holding on to our views because our ego wants us to be right more than anything else, even more than make money. Lastly, we love being told what we want to hear. This is why we prefer to read what confirms our view rather than reading stuff challenging it. You know what? That makes me happy because it offers opportunities. I am always trying to challenge my views, which is hard, and I admit I am not very good at it. Nevertheless, it sometimes works, and I hope to improve with age.

Interview

The following link leads to an interview I gave to «Executive Global» I thought you might like it:

The Swiss Banker – Incrementum

Enjoy the read, Ladies and Gentlemen!

Please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day, a wonderful weekend, and above all, joy!

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li